Although the guidance is welcome and provides clarity in some areas, there are still unanswered questions. Please see our previous legal update for an outline of the initial guidance.
Key clarifications to note from the updated guidance:
Which employers can make a claim?
As before the guidance explains that the scheme is open to any entity with a UK payroll, including; businesses, charities, recruitment agencies and public authorities. The employer must have started a PAYE payroll scheme on or before 28 February 2020. It is now clear that in order to make a claim employers must not only have a UK bank account but must also be enrolled for PAYE online, this can take up to 10 days.
The guidance clarifies that apprentices can be furloughed in the same way as other employees and that they can continue to undertake whatever training can be provided whilst furloughed. It specifies that apprentices must be paid the appropriate minimum pay whilst training, whether that be the Apprenticeship Minimum Wage, the National Living Wage or the National Minimum Wage ("NMW").
Individuals such as nannies can be furloughed, providing they were paid through PAYE and on the payroll on, or before, 28 February 2020.
Which employees can employers claim for?
As already stated the scheme is restricted to furloughed employees that were on the PAYE payroll on or before 28 February 2020, including: full-time, part-time, agency, flexible or zero hours contract employees. Clarification has been given that foreign nationals are eligible to be furloughed.
Employees who have been made redundant or stopped working for their employer after 28 February can be re-employed and subsequently furloughed. This is much wider than first anticipated and clearly extends to employees who have left their employment for any reason. The policy behind the guidance is to help ensure individuals do not fall within a loophole, however employers will inevitably have mixed views on re-hiring employees depending on the reason they left their employment in the first place. Cash flow on re-hiring will also be a concern, depending on when the grant is available from the government.
In relation to employees who are on unpaid leave, employers can only claim for employees that started unpaid leave after 28 February 2020.
A new clarification has been added that employees with caring responsibilities resulting from the coronavirus can be furloughed including those looking after children. Given the closure of schools and holiday period this is of particular note.
Employees with more than one job can be furloughed for each job.
Employees on fixed term contracts can be furloughed and their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme.
As well as employees, the grant can also be claimed for any of the following groups, provided they are paid via PAYE:
- Office holders (including company directors);
- Salaried members of Limited Liability Partnerships;
- Agency workers (including those employed by umbrella companies); and
- Limb (b) workers who are paid through PAYE.
Clarification has been given that furloughed directors can carry out particular statutory duties.
Specific contingent worker guidance has been issued with regard to contingent workers in the public sector.
Volunteer work and training can be carried out by furloughed employees providing it does not provide services to or generate revenue for the organisation. Any employee who carries out any training must be paid the NMW. The furlough payment may already cover this, however where it does not, the employer must top up the payment.
Agreeing to furlough employees
There is a requirement within the guidance that employers must confirm in writing to their employees that they have been furloughed. A record of this communication must be kept for five years. For those employers who have already furloughed employees, some more urgently than others it is wise to revisit those records and organise the information appropriately.
What can be claimed?
As before, the updated guidance refers to employers being able to claim for 80% of their employees' wages, up to a maximum of £2,500 per month and minimum automatic enrolment employer pension contributions on the subsidised wage. Claims can be started from the date the employee finishes work and starts furlough, not when the decision is made, or when the employee is written to confirming their furloughed status.
The basic mechanism for working out pay has not been amended and separates out full or part time employees on salary and employees whose pay varies (please see our previous legal update for the detail). However, a new section has been added to the guidance changing and clarifying (to an extent) the position with regard to overtime, fees, commission, bonuses and non-cash payments. The guidance refers to employers being able to claim for "regular payments" they are obliged to pay for their employees, including wages, past overtime, fees and compulsory commission payments. However, discretionary bonuses (including tips) and commission payments (presumably non-compulsory commission) and non-cash payments should be excluded.
Clarification has been given that the reference salary should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee's pay should also not be included in the reference salary. Any benefits provided to furloughed employees are in addition to the grant which can be claimed under the CJRS. Employers may wish to use the furlough agreement to negotiate benefits during the furlough period. Many have already included flexibility in their furlough agreements in order to do just that as the question of benefits was not clear at all at the outset of the scheme.
Rotation of furlough amongst the workforce
Many employers are keen to share furlough amongst the workforce from an industrial relations point of view. The pre-updated guidance indicated that it was possible to put employees in and out of furlough. The updated guidance makes this position clear that it is possible – "employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks".
Working for a different employer
The guidance clarifies that if contractually allowed, employees are permitted to work for another employer whilst on furlough. Certain industries are in desperate need of a workforce to help fight the coronavirus battle, this element of the guidance helps support the current labour supply crisis in certain sectors. If working for another employer is not permitted then Employers should make that clear.
The updated guidance provides some assistance, however many areas remain unclear, most notably, the question of annual leave during furlough. Employers have been grappling with the question of whether being on annual leave is compatible with being on furlough leave. If annual leave breaks a period of furlough, does this jeopardise payment under the grant due to the strict three week minimum periods of furlough required under the scheme? For example, if an employee has been on furlough leave for two weeks prior to Easter and then takes Good Friday and Easter Monday as annual leave, does this invalidate the claim for the grant under the scheme? The guidance is silent on this issue. We can help employers navigate the safest approach to minimise risk whilst the area is so uncertain.
The guidance is also silent on the position with regard to employees who have TUPE transferred after 28 February 2020. The policy behind the scheme would suggest that these employees should be covered, however the position is far from clear.
The position with regard to an employee who becomes sick during furlough leave has also not been clarified. Further clarity on this issue would be welcomed. Meanwhile employers will again need to protect their position in the furlough agreement.
If you would like any further information with regard to the issues raised in this update please contact your usual DWF contact or another member of the Employment Team.